K. BABU,PUDUCHERRY V. COMMISSIONER OF INCOME TAX, APPEAL - 18, CHENNAI

ITSSA 1/CHNY/2025

AI Insights

The case revolves around the seizure of \\u20b915,00,000 in cash from the possession of K. Babu during the Puducherry Legislative Election in 2021, under the Model Code of Conduct. The Assessing Officer added this amount to Babu's income under section 69A of the Income Tax Act, 1961, which was upheld by the CIT(A). Babu contended that the cash belonged to his friend, Shri Jagadeesan, who had withdrawn it from his retirement proceeds and entrusted it to Babu for safekeeping. The Tribunal examined the evidence, including bank statements and withdrawal records, and found that the cash did not belong to Babu, leading to the deletion of the addition of \\u20b915,00,000 but confirmed the addition of \\u20b92,20,000 as its source was not satisfactorily explained.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668847 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2021-2022
• Other Referred Cases: M. Kamalakannan v. DCIT, CIT v. A.N. Dyaneswaran
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P. KRISHNA KUMAR
• Assessee Lawyers: M. NIRANJANA
• Keywords: Business income; Benefit of exemption
• Section: 144; 143(3); 142(1)

Judgement Text

"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी एस.आर. रगुनाथॎ, लेखा सद˟ क े समƗ Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri S.R. Raghunatha, Accountant Member आयकर अपील सं./I.T(SS).A. No.1/Chny/2025 िनधाŊरण वषŊ/Assessment Year: 2021-22 Babu, K. No. 11, Pudu Nagar, Uruvaiyar, Mangalam Post, Villianur Commune, Puducherry 605 110. [PAN:BOAPB2326F] Vs. The Assistant Commissioner of Income Tax, Central Circle 1(3), Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Ms. M. Niranjana, CA ŮȑथŎ की ओर से/Respondent by : Shri P. Krishna Kumar, JCIT सुनवाई की तारीख/ Date of hearing : 08.05.2025 घोषणा की तारीख /Date of Pronouncement : 25.06.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 19.12.2024 passed by the ld. Commissioner of Income Tax (Appeals) – 18, Chennai for the assessment year 2021-22. 2. Ground Nos. 1 & 2 raised by the assessee are general in nature and requires no adjudication. 3. Ground Nos. 3 to 6 raised by the assessee in challenging the action of the ld. CIT(A) in confirming the order of the Assessing Officer I.T(SS).A. No.1/Chny/25 2 erroneously invoking the provisions of section 69A of the Income Tax Act, 1961 [“Act” in short]. 4. Brief facts relating to the issue are that the assessee is an individual and engaged in retail business. During Puducherry Legislative Election 2021, the Rolling Surveillance Team (RST) intercepted the assessee and found cash of ₹.15,00,000/- and seized. According to the Assessing Officer, the assessee initially stated that the source of the cash was the immovable property transaction. Thereafter, on oath, he stated that the cash seized from the assessee belonged to one Shri Jagadeesan. The assessee filed his return of income in response to the notice issued under section 142(1) of the Act declaring a total income of ₹.1,45,300/- by adopting 8% of total gross receipts. The Assessing Officer did not accept the submissions of the assessee and proceeded to add the seized cash amount of ₹.15,00,000/- to the total income of the assessee under section 69A of the Act. The ld. CIT(A) confirmed the order of the Assessing Officer by holding that no cogent evidence and explanation provided to the satisfaction of the Assessing Officer as required under section 69A of the Act. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before the Tribunal. I.T(SS).A. No.1/Chny/25 3 5. The ld. AR Ms. M. Niranjana, CA submits that the ld. CIT(A) grossly erred in law and facts confirming in invoking the provisions of section 69A of the Act and rendering entire addition to be legally untenable. She submits that the ld. CIT(A), without properly appreciating the fact that the assessee was not the owner of the money, confirmed the order of the Assessing Officer is not justified. She referred to confirmation letter dated 08.11.2024 of Shri S. Jagadeesan, which is reproduced in page 5 & 6 of the impugned order and submits that the assessee himself stated on oath on the day of seizure that the money belongs to one by name Shri S. Jagadeesan as he asked the assessee to keep the same in safekeeping. She submits that the assessee is a childhood friend of Shri Jagadeesan and the assessee agreed to hold the amount on behalf of Shri Jagadeesan until he requires the same. She also submits that the said Shri Jagadeesan withdrew the said cash from his savings bank account, which are retirement proceeds and also additional amount of ₹.4,00,000/- belongs to Jagadeesan’s son given for safe custody. She drew our attention to accounts statement of said Shri Jagadeesan, which is at page 49 of the paper book and submits that the said Shri Jagadeesan make cash withdrawal for self to an extent of ₹.11,00,000/- on 23.02.2021. Further, she drew our attention to bank statement of Jagadeesan’s son at page 64 of the paper book and submits that Jagadeesan’s son got fund I.T(SS).A. No.1/Chny/25 4 on 11.03.2021 and made withdrawals on 11.03.2021 to 14.03.2021. She argues that the source of said cash is clearly establishes that Shri Jagadeesan withdrew the cash from his bank account and also withdrawals made from ATM, altogether given to the assessee for safe custody. She argued that same arguments were offered before the Assessing Officer and the ld. CIT(A), but, however, no consideration was given to the said cogent evidence. Further, she placed on record order dated 09.04.2025 passed by this Tribunal in the case of M. Kamalakannan v. DCIT in ITA No. 946/Chny/2023 and submits that this Tribunal, by placing reliance on the decision of the Hon’ble High Court of Madras in the case of CIT v. A.N. Dyaneswaran reported in 297 ITR 135 (Mad), held that addition under section 69A of the Act is not maintainable when the cash does not belongs to the assessee, wherein, in fact, claims made by other person stating that the said cash belongs to him. She argued that the addition may be deleted by following the order of this Tribunal and allow the ground raised by the assessee. 6. The ld. DR Shri P. Krishna Kumar, JCIT relied on the appellate order and submits that the ld. CIT(A) did not accept the submissions of the assessee as it was not to the satisfaction of the Assessing Officer. Further, he submits that the facts and circumstances of the present case I.T(SS).A. No.1/Chny/25 5 are different from the facts before the Tribunal in the case of M. Kamalakannan v. DCIT (supra). 7. Heard both the parties and perused the material available on record. Admittedly, cash was seized from the possession of the assessee during the course of Puducherry Legislative Election when Model Code of Conduct was in place. There is no dispute that regarding carrying cash more than ₹.50,000/- during the Model Code of Conduct was in force during Assembly Election. The assessee was intercepted on 15.03.2021 and seized cash, wherein, he stated that source for the cash was out of immovable property transaction in respect of Plot Nos. 15, 16 in Uruvaiyur Revenue Village to an unknown person. Further, on the same day, on oath, the assessee stated that the cash belongs to one Shri Jagadeesan, a childhood friend asked him to keep the cash for safekeeping and to that effect, he made confirmation vide letter dated 08.11.2024 before the ld. CIT(A), which is reproduced in page 5 & 6 of the impugned order. On perusal of the same, we note that Shri Jagadeesan retired from the Co- operative Society and that he withdrew the cash out of his retirement proceeds. Further, he mentioned that he withdrew cash to an extent of ₹.11,00,000/- on 23.02.2021, which is reflected in his bank statement placed on record at page 53 of the paper book. On examination of the I.T(SS).A. No.1/Chny/25 6 said bank statement, we note that the said Shri Jagadeesan received retirement proceeds of ₹.11,54,026/- and got transferred to his SBI account on 23.02.2021 and immediately on the said date, he withdrew cash to an extent of ₹.11,00,000/-. Further, bank statement of Jagadeesan’s son is also placed on record from page 56 to 65 of the paper book, wherein, he received NEFT from Whirlpool India to an extent of ₹.3,02,951/- on 11.03.2021 and he made 9 withdrawals, twice on 11.03.2021 to an extent of ₹.40,000/-, twice on 12.03.2021 to an extent of ₹.40,000/-, thrice on 13.03.2021 for ₹.60,000/- and twice on 14.03.2021 for ₹.40,000/- totalling to ₹.1,80,000/- in cash from Jagadeesan’s son’s account. 8. The contention of the ld. AR is that the addition in the hands of the assessee is not maintainable as the said cash was owned by another person by name Shri Jagadeesan, who has furnished confirmation and the authorities below wrongly invoked the provisions of section 69A of the Act. She placed reliance on the order of this Tribunal stating that the addition under section 69A of the Act is not maintainable as the said cash stated to be owned by another person than the assessee. There is no dispute with regard to the statement of the ld. AR, we find that it is clearly established from the records before the Assessing Officer as well as the I.T(SS).A. No.1/Chny/25 7 ld. CIT(A), wherein, the assessee himself stated on oath that the said seized cash on 15.03.2021 does not belongs to him and it belongs to his childhood friend Shri Jagadeesan and Shri Jagadeesan also gave confirmation before the ld. CIT(A) stating that he gave ₹.15,00,000/-, out of which ₹.11,00,000/- from his retirement proceeds and ₹.4,00,000/- from his son. 9. We note that both the authorities below found the said explanation is unacceptable and there is no contrary evidence brought on record by the ld. DR against the statement of the assessee and the confirmation letter filed by Shri Jagadeesan. We find the requirement of law in such circumstance is explanation to the satisfaction of the authorities by proper cogent evidence. In the present case, Shri Jagadeesan filed confirmation letter in support of the statement of the assessee before the authorities on the date of seizure of cash. 10. On careful reading of the provisions under section 69A of the Act, we note that the said provision explains where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year; where the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or I.T(SS).A. No.1/Chny/25 8 other valuable article to the satisfaction of the Assessing Officer. In the present case, as discussed above, the assessee offered his explanation stating that the money does not belong to him and is belongs to some other person, who is a childhood friend, for safe custody, which is supported by confirmation letter. So it is clear from the record that the statement of the assessee and confirmation of another person clearly demonstrates that the said seized cash does not belong to the assessee, but, belongs to some other person. We find the Assessing officer and the ld. CIT(A) did not examine the said explanation in proper perspective as contemplated under the provisions of section 69A of the Act, but, they proceed to hold as to why other person chosen to keep cash in safe custody with the assessee, but not with any bank, in our opinion, is not justified as it is not in proper perspective as contemplated under the Act, thereby, the order of the Tribunal in the case of M. Kamalakannan v. DCIT (supra) squarely applies, wherein it has been held that the addition under section 69A of the Act is not maintainable as the cash found in assessee’s residence therein was of joint family proceeds particularly in the hands of two sons of the assessee therein. Further, we note, in order to come to such conclusion, the Tribunal followed the decision of the Hon’ble High Court of Madras in the case of CIT v. Dyaneswaran (supra), wherein, the Hon’ble High Court observed as under: I.T(SS).A. No.1/Chny/25 9 Question Nos.2 & 7 - Cash found in the assessee's office and residential premises During the search a cash amount of Rs.15,58,900/- was found in the assessee's bed room. Out of it, Rs.15,50,000/- was seized. Apart from this, cash to the extent of Rs.1,48,65,650/- was found and seized from the assessee's official chamber at TAMIN. The assessee stated that he had kept the cash belonging to the TNBA, of which he is the Chairman-cum-Chief Patron, with him and such cash would be about Rs.2 to 3 lakhs. When questioned about the cash found at his office, the assessee stated that about one crore of rupees in cash may be available and that the entire money belonged to TNBA. It was stated that the money was collected from TNBA enthusiasts as a stop gap arrangement till the money sanctioned by the Tamil Nadu Government was released. It was further stated that no receipts had been given to the persons who gave the money and also the receipts were also not recorded in the books of TNBA. The collections were done on a war- footing because the Government had not released the funds sanctioned. When questioned further, the assessee gave the names of some persons and they are as under:- 1. Karthikeyan of Salem Basketball Association 2. Sivanadiyan of Madurai Basketball Association 3. Kalaiselvan of Trichy Basketball Association 4. Viswanathan of Karur Basketball Association 5. Shanmugasundaram of Periyar Dt. Basketball Association It was stated that these persons had given loans from Association Funds or from private individuals. It was also stated that nobody other than the assessee was keeping the funds belonging to TNBA. It was also stated that Madurai Association has paid Rs.3 to 5 lakhs, Trichy and Karur Associations have paid Rs.5 to 10 lakhs and Periyar and Salem Associations have paid Rs.5 to 10 lakhs etc. The main case of the assessee is that the money belongs to TNBA but was in the possession of the assessee for the work of the stadium. The said money was collected from parties as advance for the work of the stadium. The assessee identified nine persons and the names of all these persons were given. The Assessing Officer examined these persons and all of them confirmed having advanced money. The persons who had been examined, confirmed having advanced money to the extent of Rs.1.2 Crores. The other persons who claimed to have advanced money to the extent of Rs.50 lakhs have not been examined by the Assessing Officer. So, the assessee had discharged the primary onus of giving the identity of persons and the assessee is not supposed to discharge the onus of proving the source of sources. Seven persons who had been questioned, have admitted that they had handed over the money to the assessee. The Assessing Officer only disbelieved it because they have no source. The Assessing Officer also disbelieved the explanation because TNBA has no proper source. The I.T(SS).A. No.1/Chny/25 10 statements given by various persons who had made the donations to the TNBA, have been considered by the Tribunal in its order, from paragraphs 102 to 127. It is seen that the Tribunal found that most of the names given by the assessee are of Basketball Association Members. The collection of the funds may not be in a legally accepted way. It was not denied that there were some attempts to air-condition the entire stadium and also there were works undertaken in anticipation of funds from the Government. So, the money collected for the above purpose, though not in a legally accepted way, cannot be treated as the assessee's personal asset. It is seen that, subsequently TNBA had filed its Return and the same has been accepted with the condition that this would not preclude the Revenue from contesting the issue in higher forums. In the hands of the TNBA, the assessee had been denied the benefit of exemption and an amount of Rs.152 lakhs had been brought to tax. Assessment had been completed under Section 144 r/w Section 143(3) and penalty had also been levied which means that the Revenue had treated this assessment as substantive and the tax had been accepted. So, the assessee had discharged the preliminary onus by establishing the identity of the party, capacity of the party and genuineness of the transaction. The identified party, i.e., TNBA acknowledged their role and disclosed that nine persons who are mostly concerned with basketball activities, have advanced the money of Rs.170 lakhs. Out of nine persons, the revenue examined seven persons and all of them confirmed having advanced monies, i.e., Rs.120 lakhs for the purpose. Revenue had not examined two persons who gave Rs.50 lakhs though all details about them were furnished. The source of TNBA also have been proved. Hence the monies seized from the residence as well as the office of TAMIN belong to TNBA. The Government of Tamil Nadu hosted the SAF Games 1995, an International event at Chennai and the assessee was nominated as one of the three Joint Secretaries in charge of fund raising for infrastructure facilities for the stadium. The Government agreed to fund through TAMIN, to air condition the Indoor Stadium of TNBA. Anticipating delay in release of funds, the General Council of TNBA by a resolution, authorised the assessee to collect funds upto Rs.2 Crores. TNBA collected Rs.170 lakhs from 9 persons. After spending Rs.18 lakhs for works connected with face lifting and temporary air conditioning, the balance amount earmarked for air conditioning amounting to Rs.152 lakhs was kept in the chamber of the assessee's office and in the red brief case of the assessee at Anna Nagar residence, since the basketball event was advanced preventing permanent air conditioning work to be taken up though work was entrusted to M/s.Blue Star Co. The Tribunal accepted the above explanation and held that the monies seized from the residence and office premises of the assessee belong to TNBA. Merely not withdrawing the writ petition by the TNBA and also no suit or claim filed by the person who is said to have paid the money, would not alone be sufficient to include the amount as undisclosed income in the hands of the assessee. It is also seen that the TNBA has filed its Return for the assessment year 1996-97 and subsequently it had included the amount of Rs.1,48,65,650/- seized from TAMIN office and Rs.3.35 lakhs seized from I.T(SS).A. No.1/Chny/25 11 residence, and the same have been accepted. The assessment was also completed under Section 143(3) of the Act. Hence the assessee has proved the identity, capacity and the genuineness of the sources. The finding given by the Tribunal is based on valid materials and evidence. It is a pure question of fact and is also not a perverse one. In view of the same, the Tribunal has correctly come to the conclusion that these monies should not be included in the hands of the assessee, and rightly deleted the addition. Hence we are of the view that the deletion of addition made by the Tribunal is justified. 11. In the present case also we note that the addition in the hands of the assessee is not maintainable as the said cash does not belong to the assessee, thereby, we hold that the Assessing Officer wrongly invoked the provisions of section 69A of the Act. We find, the assessee is able to give explanation to an extent of ₹.12,80,000/- only [₹.11,00,000/- of Shri S. Jagadeesan + ₹.1,80,000/- of Jagadeesan’s son] and the balance amount of ₹.2,20,000/- remained unexplained, thereby, the addition to an extent of ₹.2,20,000/- [₹.15,00,000 – ₹.12,80,000/-] is confirmed under section 69A of the Act. Thus, the ground raised by the assessee is partly allowed. 12. Ground Nos. 7 & 8 raised by the assessee is without prejudice to the ground Nos. 3 to 6, contending that the amount, if any, to be added to the total income of the assessee shall be restricted to 8% of the cash seized. Admittedly, the assessee is engaged in retail business and offered income from business by adopting 8% of the total gross receipt. The remaining amount of ₹.2,20,000/- confirmed hereinabove, in our I.T(SS).A. No.1/Chny/25 12 opinion, cannot be treated as business income as the assessee failed to offer explanation about nature and acquisition of the said amount. Therefore, the submission of the ld. AR is not acceptable for treating the same as business income. Thus, ground Nos. 7 & 8 raised by the assessee are dismissed. 13. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 25th June, 2025 at Chennai. Sd/- Sd/- (S.R. RAGHUNATHA) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 25.06.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "